The bipartisan infrastructure bill will increase certain sectors of ETF’s.
According to ETF, industrials sector ETFs are an obvious way to play the bill. However, investors should be cautious about what’s inside their industrial ETF, as GICS’ definition for the sector includes commercial services like short-term employment offices and couriers. The Industrial Select Sector SPDR Fund (XLI) has a 4.82% weighting toward UPS and a nearly 20% allocation to freight and logistics, while the Fidelity MSCI Industrials Index ETF (FIDU) has a 3.6% weighting to UPS and a 16.3% allocation to the freight subsector.
One ETF that offers a more focused take on this idea is the Global X U.S. Infrastructure Development ETF (PAVE). The fund’s performance this year has waxed and waned with the congressional back-and-forth on the details of the spending bill. Year-to-date, the ETF has gained 36.5%. Relative to some other infrastructure ETFs like the iShares U.S. Infrastructure ETF (IFRA), PAVE has a focus on “hard” infrastructure like roads, bridges and transport.
The First Trust RBA American Industrial Renaissance ETF (AIRR) is another ETF that offers focused exposure to likely beneficiaries of this spending. More than 70% of the portfolio is allocated to companies in the construction and machinery subsectors. This makes it one of the purest ETF plays for the initial surge of spending from this bill.